The White House

Office of the Press Secretary

For Immediate Release
May 17, 2016

FACT SHEET: Growing Middle Class

Paychecks and Helping Working
Families Get Ahead By Expanding
Overtime Pay
Were making more workers eligible for the overtime that youve earned.
And its one of the single most important steps we can take to help grow
middle-class wages.
President Barack Obama, La Crosse, WI, July 2, 2015

Every week, millions of Americans work more than 40 hours a week but do not receive
the overtime pay they have earned. Tomorrow, the Department of Labor will be
finalizing a rule to fix that by updating overtime protections for workers. In total, the
new rule is expected to extend overtime protections to 4.2 million more Americans
who are not currently eligible under federal law, and it is expected to boost wages for
workers by $12 billion over the next 10 years.
For much of the 20th century, the 40-hour workweek was a pillar of economic security
for working families. The rules of the road were simple: if you were called on to put in
extra work, your employer had to pay you extra regardless of whether you received an
hourly wage or a salary. This left most Americans with more money in their pockets,
more time to balance obligations at home and at work, and the opportunity to get
ahead with more time outside of work for school or additional training.
Yet over the past 40 years, overtime protections eroded as a result of inflation and
lobbyists efforts to weaken them. The share of full-time workers qualifying for
overtime based on their salaries has plummeted from 62 percent in 1975 to 7 percent
todayeven though the protections are more important than ever. Parents now have
more demands on their time, with all parents working in more than six out of ten
households with children. And despite a recent acceleration in wage growth and

businesses adding 14.6 million jobs over a record 74 straight months of job growth,
most Americans have seen relatively stagnant wages for the past few decades.
Thats why tomorrow, the Department of Labor is finalizing a rule to update overtime
protections so they can help millions more Americans. The final rule, which takes
effect on December 1, 2016, doubles the salary thresholdfrom $23,660 to $47,476
per yearunder which most salaried workers are guaranteed overtime (hourly
workers are generally guaranteed overtime pay regardless of their earnings
level). Additionally, this new level will be automatically updated every three years to
ensure that workers continue to earn the pay they deserve.
Increasing overtime protections is another step in the Presidents effort to grow and
strengthen the middle class by raising Americans wages. This extra income will not
only mean a better life for American families impacted by overtime protections, but will
boost our economy across the board as these families spend their hard-earned
wages.
RESTORING OVERTIME PROTECTIONS
In March 2014, President Obama signed a memorandum directing the Department of
Labor to modernize our nations overtime rules, which have been comprehensively
updated only once since the 1970s.
Overtime protections were first put into place by the Fair Labor Standards Act of 1938,
and established the general standard that workers be paid time-and-a-half for any
hours worked over 40 hours in a week. In general, all hourly employees are
guaranteed overtime, and salaried employees are presumed to have the same
guarantee unless they both: (1) make more than a salary threshold set by the
Department of Labor, and (2) pass a test demonstrating that they primarily perform
executive, administrative, or professional duties. A limited number of occupations are
not eligible for overtime pay (including teachers, doctors, and lawyers) or are subject
to special provisions.
Tomorrows rule takes into account input from 270,000 public comments and
extensive outreach meetings with employers, business associations, small
businesses, workers, worker advocates, non-profit organizations, educational
institutions, and state and local government representatives. It will:

Raise the salary threshold from $23,660 to $47,476 a year, or from $455 to $913 a
week. This doubles the current salary threshold while being responsive to public comments
regarding regional variations in income by setting the salary threshold at the 40th percentile of
full-time salaried workers in the lowest income Census region (currently the South). Tying the
salary threshold to the lowest-wage region of the country has strong historical precedent in
previous rulemakings.

Raise Americans wages by an estimated $12 billion over the next 10 years, with an average
increase of $1.2 billion annually. At the same time, employers retain considerable flexibility in
how they comply with the new rule, such as increasing salaries to at least the new threshold to
keep positions that are primarily executive, administrative, or professional exempt from overtime
pay; paying overtime for hours worked in excess of 40 in a week; or reducing overtime hours.

Extend overtime protections to 4.2 million additional workers who are not currently
eligible for overtime under federal law. Others who may already be eligible for overtime will
also benefit as the higher salary threshold will serve as a useful bright line test for workersand
their employersto understand whether they are eligible for overtime. The number of workers
in each state who will benefit from the rule can be found HERE.

Update the salary threshold every three years. The updates will ensure the threshold is
maintained at the 40th percentile of full-time salaried workers in the lowest income region of the
country. Based on projections of wage growth, the threshold is expected to rise to more than
$51,000 with the first update on January 1, 2020.

Raise the highly compensated employee threshold from $100,000 to $134,004 above
which only a minimal showing is needed to demonstrate an employee is not eligible for
overtime. This upper threshold was designed to ease the burden on employers in identifying
overtime eligible employees since it is more likely that workers earning above this high salary
level perform the types of job duties that would exempt them from overtime requirements.

Respond to employers concerns by making no changes to the duties test and allowing
bonuses and incentive payments to count toward up to 10 percent of the new salary
level. Workers earning more than the salary threshold are still subject to the duties test to
determine eligibility for overtime. In their comments to the proposed rule, employers argued that
changing the duties test would be difficult and costly to implement, and the final rule leaves the

existing duties test in place. Additionally, for the first time, employers will be able to count
bonuses and commissions toward as much as 10 percent of the salary threshold.
The Department of Labor will also release three technical guidance documents,
designed to help private employers, non-profit employers, and institutions of higher
education come into compliance with the new rule.
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